Is Apple's Passbook the Stealth E-Wallet Success?

NEW YORK (MainStreet)Just when most digital wallet experts had forgotten the year-old Apple Passbook --widely dismissed as ineffectual and neutered -- a discordant voice wants to get an unexpected message across: just maybe Passbook is the stealth winner of the early rounds of the e-wallet wars, and it is doing it by sneaking in a powerful but largely uncommented upon transaction capability.

"We are seeing many, many dollars added into Passbook and spent by consumers," said Gene Cornfield, a vice president at CashStar, a digital e-gift card company that works with an A list roster of companies from Starbucks to the Gap and Dell to Sephora.

The knock against Passbook - introduced by Apple at the annual Worldwide Developers Conference 2012 - has always been what it doesn't do which is that it cannot be coaxed into use as a tap and pay digital wallet. From the beginning, critics have been scathing that the bowdlerized app disappoints - but maybe there is more to this story. Just maybe Passbook, which runs only on iPhone, has another, enticing side that has stayed largely hidden.

At least that is Cornfield's message, which he released in sync with Apple's WWDC 2013, which wrapped this week in San Francisco. His contention: Passbook already packs a potent transaction capability. "Every day we are seeing many consumers paying with Passbook on their iPhones," said Cornfield.

The key is that Passbook - billed as a kind of digital repository for loyalty cards, airplane tickets, and the other stuff we cram into leather wallets - has the ability to store e-gift cards that can be used at point of sale. Dozens of cards - available through the Apple Store or the associated app -- are sold in amounts that climb as high as $2,000 and they are as good as cash at the issuing merchants.

Many of the e gift cards also are reloadable, said Cornfield, so when you chow your way through that $10 Cheesecake Factory card you may be able to throw more value on it, right inside Passbook.

And that, said Cornfield in an interview, sounds exactly like digital wallet transactions at point of sale. Hundreds of thousands of people are already using Passbook to pay at point of sale, said Cornfield, who elaborated that 55 of the more than 300 brands currently represented by CashStar now have a Passbook presence.

"What we are seeing is that gift cards are getting transformed into mobile reloadable payment cards, and this may be exactly the thing to spur digital wallet adoption," said Cornfield.

Of course the other part of the story is that indeed digital wallet adoption is anemic, and there is no fast track growth in sight. Rumors are plentiful that Google Wallet at point of sale is marked for extinction and Isis - the wallet piloted by the leading mobile phone carriers -- seems already dead (a public relations representative declined to respond to multiple requests for a status update).

So if Passbook serves as a kind of training wheels to coax users into using something that sort of looks like a digital wallet, that is boldface headline news, at least in the eyes of the e wallet proponents.

Not every expert shares Cornfield's optimism about Passbook. Andy O'Dell, chief operating officer at e-wallet rival Clutch, is blistering in his assessment. "Passbook is a repository without clear identity of what it wants to be. Retailers don't know what to do with Passbook. There's been no marketing for Passbook. The buzz has waned."

Meantime, digital wallet expert Peter Olynick, lead of the cards practice at consulting company Carlisle and Gallagher, said that to his eyes, Passbook is in its early stage. "The user experience is O.K.," said Olynick, who indicated it definitely is not a homerun but it is better than some competitors'. He added: "We are waiting for the next iteration."

Will that iteration in fact offer more robust digital wallet functionality at retail? That is not a prediction heard from Apple watchers who, generally, are promiscuous in their crystal ball reading in the run up to WWDC. Absolutely nobody expects Apple to announce that it is building tap and pay Near Field Communication (NFC) payment tools into iPhone - but a reality is that Apple seers rarely have been correct in recent years and so it's anybody's guess what if anything Apple will announce next. Just know that whatever Apple says, it already may have snagged the pole position in the e-wallet race - and it's done that without having anybody notice.